South Korea's top economic policymaker said Tuesday that the government will keep a no-tax- increase policy despite growing criticism that it took a turn into hiking taxes especially on people in the middle-income bracket.
Right after the three-day Chuseok holiday, the Park Geun-hye administration announced a plan Thursday to raise an average cigarette price by 80 percent to 4,500 won (4.34 U.S. dollars) from Jan. 1, 2015.
A day later, the government said it will lift taxes on residents and commercial vehicles, which would increase tax-paying burden on ordinary people along with the cigarette tax hike.
"It would be misleading to say that South Korea switched into a tax-raising policy," Finance Minister Choi Kyung-hwan told foreign correspondents in central Seoul. He said the cigarette price would be raised to enhance public health, adding the local tax increases, such as the resident and commercial vehicle taxes, would come in response to strong request from local governments struggling with high deficits.
The tax hike was under strong criticism as the three taxes are widely seen as an indirect tax, which imposes the same tax rate on people, poor or rich, and put greater tax burden on the poor.
As regards rising demand for a direct-tax hike, Choi said the income tax was already raised under the current and previous governments, noting the corporate tax would not be lifted as the tax increase can cause a foreign capital outflow.